Vivo Energy plc 2020 Half Year Results/media/Files/V/... · This presentation includes...
Transcript of Vivo Energy plc 2020 Half Year Results/media/Files/V/... · This presentation includes...
Vivo Energy plc2020 Half Year Results
28 July 2020
Disclaimer
IMPORTANT: Please read the following before continuing.
No offer or solicitation
This presentation is provided for informational purposes only and is not intended to and shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to
buy any securities of Vivo Energy plc (the “Company”) or a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Neither the contents of the Company’s website, nor the contents of any other website
accessible from hyperlinks on such websites, is incorporated herein or forms part of this presentation.
Forward-looking statements
This presentation includes forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties, including risks associated with the impact of
COVID-19, many of which are beyond the Company’s control and all of which are based on the Directors’ current beliefs and expectations about future events. Forward-looking statements are
sometimes identified by the use of forward-looking terminology such as: “believe”, “expects”, “may”, “will”, “could”, “should”, “shall”, “risk”, “intends”, “estimates”, “aims”, “plans”, “predicts”,
“continues”, “assumes”, “positioned”, “anticipates” or “targets” or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements include all matters
that are not historical facts. They appear in a number of places throughout this report and include statements regarding the intentions, beliefs or current expectations of the Directors or the
Group concerning, among other things, the future results of operations, financial condition, prospects, growth, strategies of the Group and the industry in which it operates.
No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Such risks and uncertainties
could cause actual results to vary materially from the future results indicated, expressed, or implied in such forward-looking statements.
Such forward-looking statements contained in this report speak only as of the date of this report. The Company and the Directors expressly disclaim any obligation or undertaking to update
these forward-looking statements contained in the document to reflect any change in their expectations or any change in events, conditions, or circumstances on which such statements are
based, unless required to do so by applicable law.
1
Agenda
PresenterTopic
CEO Update 1 Christian Chammas, Chief Executive Officer
Finance & Operating Review2 Johan Depraetere, Chief Financial Officer
Summary3 Christian Chammas, Chief Executive Officer
Q&A4
2
H1 Review
Excellent start to 2020 pre-COVID, with improving Shell performance
COVID impact wide-ranging across our markets
Rapid action taken to protect our stakeholders and the business
Strong recovery underway, but remain cautious
Business remains resilient with robust balance sheet
3
Morocco
Competition review of the industry is ongoing
Hearing in Morocco last week as part of the review
Competition Council will arrive at their conclusions in due course
We maintain that we have always conducted our operations in accordance with applicable
laws and regulations
4
Committed our 2020 community budget to
initiatives supporting the fight against COVID-19
Supported over 70 projects across our operating
countries
Some examples of great innovative thinking
Playing our part in the fight against COVID-19
PROTECTING OUR PEOPLE AND CUSTOMERS SUPPORTING OUR COMMUNITIES
5
Relaxation of restrictions driving volumes
6
Partial mobility restrictions Social distancing
Source Country information(1) Includes restrictions on movements between cities, curfews or local lockdowns of areas
(2) Includes a range of measures that vary by country including school and border closures and limitations on group gatherings
Full lockdown
RESTRICTIONS AT THEIR PEAK (APRIL)
9 countries in full
lock-down
11 countries with
partial mobility
restrictions1
3 countries using
social distancing
measures2
RESTRICTIONS AS AT JUNE 30
0 countries in full
lock-down
12 countries with
partial mobility
restrictions1
11 countries using
social distancing
measures2
Business recovery underway
7
-80%
-60%
-40%
-20%
0%
20%
40%
Jan Feb Mar Apr May June
Volume Unit Margin Gross cash profit
PERCENTAGE CHANGE IN MONTHLY PERFORMANCE AGAINST H1 2019
(% change)
Finance & Operating Review
Johan Depraetere
H1 2020 performance highlights
9
ADJUSTED
EBITDA
$ million
140
(34)% vs H1 19
VOLUME
Million litres
4,618
(7)% vs H1 19
GROSS CASH
UNIT MARGIN
US$/000 litres
65
(7)% vs H1 19
GROSS CASH
PROFIT
$ million
300
(15)% vs H1 19
A resilient performance despite the impact of COVID-19
VOLUME:
UNIT MARGIN:
VOLUME:
UNIT MARGIN:
2.1bn litres (-%)
$43/’000 (-9%)
66m litres (-%)
$537/’000 (-%)
VOLUME:
UNIT MARGIN:
NFR:
2.5bn litres (-13%)
$66/’000 (-7%)
$12m (-20%)
H1 2020 segmental performance
Retail CommercialLubricants
10
216
176
H1 2019 H1 2020
($ million)
36 35
H1 2019 H1 2020
($ million)
9989
H1 2019 H1 2020
($ million)Gross Cash Profit Gross Cash ProfitGross Cash Profit
COVID impacted different businesses to different extents
11
-50% -45% -40% -35% -30% -25% -20% -15% -10% -5% 0%
Aviation and Marine
Non-fuel retail
Retail fuels
Group
Premium fuels
LPG
Lubricants
Commercial fuels
CHANGE IN H1 20 GROSS CASH PROFIT v H1 19
(% change in H1 20 Gross Cash Profit vs H1 19)
65
69 70
31
H1 Reported Unit Margin Inventory Impact Hyper-inflation Impact Underlying H1 2020 Unit
Margin
H1 2019 Unit Margin
Underlying unit margins remain stable
GROSS CASH UNIT MARGINS
($ per thousand litres)
12
$ million H1 2020 H1 2019 Change
Gross cash profit 300 351 (15)%
Adjusted EBITDA 140 212 (34)%
Depreciation and amortisation 59 50 +18%
Net finance expenses (35) (32) +9%
ETR (%) 69% 39% n/a
Adjusted net income 16 82 (80)%
Adjusted Net Income impacted by our operating leverage
13
Impacted by lower volume & unit margins
Primarily due to Engen acquisition
Due to increased use of local facilities
Higher relative impact of non P&L related impacts
such as withholding taxes and permanent items
Due to lower GCP and slightly higher SG&A due
to Engen and COVID-19 relief spending
As volumes recover, expect to benefit from operational leverage
Cash flow impacted by working capital movements…
Break-even at operating cash flow
level, excluding Q1 2020 reversal of
c.$111 million of payables that
benefitted 2019 year-end
Working capital outflow driven by
timing of payments above, together
with outflow in payables from
reduced purchases of products at
lower prices
KEY HIGHLIGHTS
14
$ million H1 2020 H1 2019 Change
Net income 13 72 (82)%
Adjustment for non-cash items / other 83 93 (11)%
Income tax paid (41) (38) (8)%
Net change in operating assets and
liabilities and other adjustments(167) (105) (59)%
Cash flow from operating activities (112) 22 nm
Net additions to PP&E and intangible
assets(44) (49) (10)%
Free cash flow (156) (27) nm
Special items 10 12 (17)%
Adjusted free cash flow (146) (15) nm
…but working capital returning to structurally negative position
15
Driven by:
Reducing supply of fuels by 75% in May to balance lower demand
Close management of payables and credit exposures
-100
-50
0
50
100
150
-1,500
-1,000
-500
0
500
1,000
1,500
Jan Feb Mar Apr May June
Net
Work
ing
Cap
ital
Tota
l W
ork
ing
Cap
ital
Trade Payables (LHS) Trade Receivables (LHS) Inventories (LHS) Net Working Capital (RHS)
SIGNIFICANT NET WORKING CAPITAL IMPROVEMENT SINCE APRIL
($ million)
Balance sheet remains strong with low leverage
(1) Net debt includes lease liabilities and Adj EBITDA is last twelve months
($ million) H1 2020 FY 2019
Long-term debt 444 371
Lease liabilities 119 125
Total debt exc. short -term bank
borrowings563 496
Short-term bank borrowings 323 229
Less cash and cash equivalents (460) (517)
Net debt 426 208
Net debt to Adj EBITDA1 1.2x 0.5x
CAPITAL STRUCTURE OVERVIEW
Maintained a strong balance sheet through the
challenging environment
Net debt increased from year-end, but still lower than
12 months ago
Increased utilisation of short-term bank borrowing
for working capital purposes during pandemic
Drew an additional $110 million on the RCF to
ensure flexibility, if required
Leverage ratio remains low
16
Continuing to invest in our business
BREAKDOWN OF CAPITAL EXPENDITURE
10
19
26
22
13 3
49
44
H1 2019 H1 2020
Maintenance Growth Special Projects
Strategically slowed down non-
essential capital expenditure
Continued to invest in growth
projects across our markets
30 net new retail sites
23 new QSR / CR offerings
Focus on maintaining high standards
across the network during crisis
“Shining” sites initiative extended
across network, over 125 sites
shined in H1
KEY HIGHLIGHTS
($ million)
17
Outlook and dividend update
Encouraged by improvement in trading in June and July to date
Remain cautious as increased infection rates may delay further relaxation of measures
Not yet appropriate to provide updated guidance
Intend to restart dividend payments later in the year if recovery continues
18
Summary
Christian Chammas
Proud of our responsible operations
LEADING HSSE STANDARDS
Industry-leading safety record
Strong environmental performance
Solar panels on retail sites in 10 countries
Developing commercial hybrid solution
Expanding suite of management systems
SUSTAINABILITY ROADMAP
Vision to be most respected energy company in
Africa
Ethos embedded in our business and core values
Reviewing our sustainability approach during H2
to create a clear plan to guide our future strategy
and reporting
20
Our markets are resilient and our products remain essential
21(1) Based on IMF June forecasts and weighted based on 2019 annual volumes (excludes Reunion)(2) IMF Figures as of 24 June 2020
(3) CITAC data from 2000-2019
MARKETS EXPECTED TO REBOUND IN 2021
RECORD IMF DISBURSEMENTS IN SUB-SAHARAN AFRICA2
Markets have been through tough times before
IMF forecast a weighted average 2020 GDP
contraction of 2.0%1 in our 23 markets
Forecast to rebound to 4.9%1 growth in 2021
FUEL REMAINS A CONSUMER STAPLE
Macro drivers behind continued fuel demand
growth remain unchanged
Road network and car parc continue to grow
Few public transport alternatives, making roads
the primary transport route
Fuel demand has almost doubled in our 23
markets over the past 20 years3
Delivering against strategy through the crisis
22
GROWING NON-FUEL RETAlL
NETWORK EXPANSION
DIGITAL INNOVATION
Expanding contactless payments availability
across major markets
Trialling LPG and both food and non-fuel retail
delivery options
JV with KFC Namibia brings 21 restaurants and is the 6th
country partnership with KFC1
JV with leading French fast food chain in Tunisia, aim to grow to
15 sites in next 3 years
Finalising agreements to acquire several dealer networks in Engen markets1
Opened a net total of 30 new Shell and Engen sites in H1 20
(1) Completion expected in H2 2020
Skilfully navigating current challenges
23
De-centralised operating model is agile and accountable
Our products remain a critical part of our customers lives
Resilient operations, diversified geographically and by end customer
Recent investment in IT has enabled informed decision making
Strong balance sheet has provided flexibility
Proud of our people and their response
Successful business model positioned for sustainable growth
24
Leading market positions across Africa, with premium brands
Growth underpinned by favourable African
macro and fuel market fundamentals
Diversified operations with resilient margins
Integrated model creates a sustained
competitive advantage
Track record of executing the Group’s
growth strategy
Strong free cash flow generation with low
leverage
Appendix
25
26
Resilient financial performance
(1) Diluted EPS and Adjusted diluted EPS based on weighted average of 1,266 million shares in issue for the period ending 30 June 2020 and 1,244 million shares for period ending 30 June 2019
$ million, unless otherwise indicatedSix-month period ended
30 June 2020
Six-month period ended
30 June 2019Change
Volumes (million litres) 4,618 4,985 (7)%
Gross cash profit 300 351 (15)%
EBITDA 136 200 (32)%
Adjusted EBITDA 140 212 (34)%
ETR (%) 69% 39% n/a
Net income 13 72 (82)%
Diluted EPS1 (US cents) 1 5 (88)%
Adjusted net income 16 82 (80)%
Adjusted diluted EPS1 (US cents) 1 6 (85)%
Summary Income Statement
$ million, unless otherwise indicatedSix-month period
ended 30 June 2020
Six-month period
ended 30 June 2019Change
Revenues 3,375 3,903 (14)%
Cost of sales (3,114) (3,585) (13)%
Gross profit 261 318 (18)%
Selling and marketing costs (105) (103) +2%
General and administrative cost (89) (77) +16%
Share of profit of JVs and associates 9 11 (18)%
Other income/(expense) 1 1 -
EBIT 77 150 (49)%
Finance expense - net (35) (32) +9%
EBT 42 118 (64)%
Income taxes (29) (46) (37)%
Net income 13 72 (82)%
27
Overview of operations by segment
28
$ million, unless otherwise indicated
Six-month period ended
30 June 2020
Six-month period ended
30 June 2019 Change
Volumes (million litres)
Retail 2,481 2,840 (13)%
Commercial 2,071 2,079 0%
Lubricants 66 66 0%
Total 4,618 4,985 (7)%
Gross cash unit margin ($/’000 litres)
Retail fuel (excluding Non-fuel retail) 66 71 (7)%
Commercial 43 47 (9)%
Lubricants 537 537 0%
Total 65 70 (7)%
Gross cash profit
Retail (including Non-fuel retail) 176 216 (19)%
Commercial 89 99 (10)%
Lubricants 35 36 (3)%
Total 300 351 (15)%
Adjusted EBITDA
Retail 69 122 (43)%
Commercial 46 63 (27)%
Lubricants 25 27 (7)%
Total 140 212 (34)%
Our integrated model provides a sustained competitive advantage
(1) Represents fuel storage capacity only and includes equity share of storage capacity in joint ventures, excluding bitumen and LPG. JV storage is included on a pro rata basis based on ownership %, pro-forma for Engen markets
(2) As at December 2019(3) Fuel and lubricants sales in 2019
(4) Via a combination of direct ownership and the 50% SVL joint venture
Terminals / storage: +1 billion litres of capacity across
20 countries(1)
Fuel supply(domestic refineries & tenders, Vivo Energy
own imports)
Retail sites: +2,200 sites(2)
3rd party transportation of fuels in accordance with
Vivo Energy standards and controls
Commercial customers: c.4.4bn litres(3)
Retail customers: c.5.9.bn litres(3)
Access to 6 lubricantsblending plants(4)
Vivo Energy ownership / operational control
29
Owning storage assets in Africa is essential to control costs, guarantee supply and manage HSSE and product quality
Company Operated Dealer Operated
Dealer Owned(~35% of portfolio)
De-risking Retail performance through use of Dealer model
Forecourt operating risk transferred to the Dealer, whilst we focus on supply and standards
Dealer manages employees, opex, working capital and interaction with the consumer
− In return, receive the fixed “retailer” margin
Vivo Energy retains responsibility for supply, branding, marketing, operating standards and HSSE
− In return, receive fixed “marketer/distributor” margin
Captive channel and low operating complexity as our “consumer” is the dealer
Generally flagship or highway sites
Sometimes mandatory initial platform due to regulations
Vivo Energy is responsible for all operating costs and interaction with the consumer
Higher margin capture
High level of operational complexity
30
~5% of portfolio
Company Owned(~65% of portfolio)
Dealer Operated
~95% of portfolio is Dealer Operated
Source: Company information (1) Volume percentage based on 2019 total volume of each country
(2) Excludes countries where subsidies exist relating to LPG (3) Vivo Energy also captures the retailer margin under the COCO model.
OVERVIEW OF RETAIL PRICE REGULATION IN OUR COUNTRIES
Landed cost of product
Primary transport
Storage
Secondary transport
Oil marketer margin
Duties
Wholesale price
Retailer margin
Regulated pump price
Scope for lower supply chain costs through scale benefits
Vivo Energy’s margin(3)
Regulated fuel markets are common in emerging markets
– Government sets the pump price, which changes periodically to reflect the current oil price and input costs
– Marketing margins are fixed per litre
Regulated markets can be also be Subsidised, where the pump price is stable and doesn’t reflect the oil price
– Marketing margins are fixed per litre
Deregulated markets are more common in developed economies
– Pump prices fluctuate frequently due to oil price and competition
– Marketing margins are variable per litre
Majority presence in regulated markets provides margin stability
MARGINS IN REGULATED MARKETS ARE COST PLUS
31
Regulated(no subsidies)
18 countries(52% of volumes(1))
Regulated(with subsidies(2))
2 countries(15% of volumes(1))
Regulators set pump prices using assumed supply chain costs
The regulated price contains an allowed margin for oil marketers, generally 5-10% of pump price
Oil marketing companies can make margins above this by achieving lower supply chain costs than those in the pump price formula
Savings are driven by the reach, scale and efficiency which can be achieved by large, vertically-integrated player
REGULATED MARGIN WITH EFFICIENCY UPSIDE
De-regulated3 countries
(33% of volumes(1))
Supply Regular fuel margin Subsidies
Morocco Deregulated Deregulated Bottled LPG only
Uganda Deregulated Deregulated None
Ghana Partially regulated Deregulated None
Namibia Deregulated Regulated Rural areas only
Botswana Deregulated Regulated Kerosene only
Madagascar Deregulated Regulated None
Mali Deregulated Regulated LPG only
Zimbabwe Deregulated Regulated None
Rwanda Deregulated Regulated None
Malawi Deregulated Regulated None
Kenya Tender Regulated None
Mozambique Tender Regulated None
Reunion Tender Regulated None
Zambia Tender Regulated None
Cape Verde Tender Regulated None
Guinea Tender Regulated All fuel products
Tanzania Partially regulated Regulated None
Senegal Partially regulated Regulated None
Mauritius Partially regulated Regulated LPG only
Gabon State monopoly Regulated None
Burkina Faso State monopoly Regulated LPG only(1)
Côte D’Ivoire State monopoly Regulated LPG only
Tunisia State monopoly Regulated All fuel products(2)
Overview of Regulation in our markets
Source: Company information. (1) And Société Nationale d'électricité du Burkina Faso (SONABEL).
(2) Except jet fuel.
RE
GU
LA
TIO
N
Low
High
32
Our operating environment
CHALLENGE MITIGATION
Stocks / oil price
Currency
Compliance
Credit
Supply
Fluctuations in oil price reflected in the pump price, not borne by the Company
Margins are either fixed via a regulated price structure (20 of 23 countries) or through market dynamics (3 countries)
Countries manage stock levels with maximum and minimum stock levels through manual of authorities
~60% of H1 2020 Adjusted EBITDA derived from currencies pegged to the EUR / USD
Utilise hedging strategies to mitigate major FX risks (i.e. importing fuels into a country)
Upstream dividends from operating units where possible into USD
Robust credit approvals process with central oversight, local empowerment and use of credit risk mitigation measures when required
Bad debts represented around 2% of gross cash profits during H1 2020
Robust and proven internal control framework with limited historical losses from fraud / bribery
The first company in Africa to achieve ISO 37001 certification for our anti-bribery management system
Access to over 1.0 billion litres of storage in Africa helps to mitigate major supply risks
Utilise over 100 suppliers, with Vitol, the worlds largest oil trader, representing 30% of Group supply in 2019
33